What is remortgaging?

You do not have to move house in order to remortgage, it is simply changing your mortgage from one lender to another. Sometimes it involves staying with the same lender but just changing deals. This will end your current mortgage and you start a new mortgage with a lower rate of interest.

Before, those who sought a remortgage would normally be in a crisis situation and desperate to raise extra funds. This is no longer the case.

Remortgages are now used for different reasons:

You could save between 15 and 30% of your monthly mortgage repayments on your home by remortgaging. Some lenders offer great incentives for you to do this for example, by waiving the cost of the remortgage so it is free.

Whatever the reason for a remortgage, each case will be looked at based on its own merits. We find the best deal for you by searching the lender market

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Benefits of Remortgaging

Most lenders keep their best deals to entice new customers rather than using them to keep existing borrowers. If this is what is happening to you, you may get a better deal by changing to a different lender. Lenders are now more flexible, because of a rise in competition.

You still have to repay the amount borrowed, plus interest, but there is nothing to stop you from asking for a review based on the evidence of your repayment record, or to transfer to a deal with better terms and conditions.

You can save thousands of pounds by switching to a remortgage deal with a lower interest rate than by staying with your current lender. Many borrowers pay the lender's standard variable rate (SVR), which is the lender's most expensive option. The SVR can be up to two percentage points higher than the Bank of England base rate.

Cheaper deals are offered by lenders, but they normally last two, three or five years after which time the interest rate reverts back to the SVR. These deals are cheaper than the base rate and actually cost the lenders money. The money is loaned to you at a cheaper rate than the lender borrows it themselves. This is done in the hope that you will either forget or not bother to remortgage after the deal has finished and so end up paying the SVR - which is very profitable for the lenders.

If you think you are paying a higher rate of interest, then a remortgage may reduce your monthly payments. Alternatively, if you want to raise funds for a specific purpose such as building an extension, or buying a new car, you can release the "positive equity" in your home giving you a lump sum for whatever purpose you desire. 'Positive equity' is when the current market value of your house is larger than the mortgage amount you have.

Another reason why people look to remortgage their properties is to consolidate their debts. This is done by placing outstanding debts into one monthly repayment. Consider this option carefully before securing other debts against your home as your home may be repossessed if you do not keep up repayments on your mortgage.

The Pitfalls of Remortgaging

There are usually costs involved when remortgaging. Consider these when looking at the pros and cons of remortgaging.

It all depends on interest rates. As they are running low, borrowing may seem like a good idea at present. What happens if they go up? You have to be certain that you can afford the repayments whatever the economic climate. Failure to make payments can result in you loosing your house, and left wishing you had read the small print.

Check the conditions of your existing mortgage for any redemption penalties. If there is, it could be large enough to wipe out the benefits of remortgaging.

Brokers who help you to remortgage often charge a fee on top of your new deal that is added to your new mortgage, pushing the price up and making it less of a bargain.